Service Bundling and Time Warner Cable and Prices

Time Warner Cable is a Multi System Operator (MSO) who has bundled service offerings. Per Wikipedia on bundled service offerings:

Many cable TV Internet access providers offer Internet access without tying it to a cable television subscription, but stand-alone cable Internet is purposely provided at higher rates—the extra cost is said to cover the cable line access much like phone companies charge a small line-access fee for having DSL Internet service without a phone subscription. There are those who allege that the higher stand-alone rates are not so much to more efficiently cover actually-increased cost as it is to compel the customer to bundle it with a cable television subscription.

I think the bundling practices go even further than an super premium on buying just interner or TV. They bundle within services offerings too. The three core channel packages TWC offers appear to be Basic Service, Standard Service, DTV-Digital Television (I'm still not sure what the difference is between DTValue and DTV-Digital Television). But you cannot get these packages individually. Note these lines included in the top of the Time Warner Cable Channel Lineups for Manhattan:

• The purchase of Basic service is required to receive other services
• The purchase of Standard service is required to receive DTV-Digital Television

So to get Standard you have to buy Basic and to get DTV you have to buy Standard. I have a high definition TV so I want HD channels naturally. DTV basically has all the HD channels you want while Basic and Standard offer no HD channels. So essentially to get any HD channels from TWC you have to buy the whole bundle!

Some stories about cable bundling and their take home paragraphs:

• Why cable companies bundle their channels : The New Yorker

...if you’re watching only sixteen channels why should you pay for eighty-five? So consumer advocates have been pushing for a system of so-called “à la carte” programming, expecting that this would drive down prices for consumers. In fact, it probably wouldn’t. The simple argument for unbundling is: “If I pay sixty dollars for a hundred channels, I’d pay a fraction of that for sixteen channels.” But that’s not how à-la-carte pricing would work. Instead, the prices for individual channels would soar, and the providers, who wouldn’t be facing any more competition than before, would tweak prices, perhaps on a customer-by-customer basis, to maintain their revenue. That doesn’t necessarily mean that Bravo would suddenly cost fifteen dollars a month, but there’s little evidence to suggest that à-la-carte packages would be generally cheaper than the current bundles.

So far, the task hasn’t been too difficult, in part because consumers haven’t shown much unbundling fervor. If there were sizable demand for à la carte, you’d expect at least one of cable’s competitors, like DirecTV, Dish Network, or Verizon’s FiOS, to offer it, but none do. You’d also think that, as bundles have grown more expensive, and as building your own TV experience has become easier—by watching online, downloading from iTunes, and getting high-definition network broadcasts via antenna—cable and satellite would have got less popular. But subscriptions continue to grow...

• Unbundling Cable Television: An Empirical Investigation [academic paper by Dmitri Byzalov, Assistant professor, Department of Accounting, Fox School of Business, Temple University]

...I find that consumers do not gain much from unbundling, even in the best-case scenario. Even if the networks do not increase their wholesale prices (license fees per subscriber) after unbundling, the average short-run increase in the consumer surplus is estimated at just 35 cents per household per month...

• Tying and Bundling Raises Cable Prices

...Disney owns multiple local OTA ABC stations, ESPN, ESPN2 and the Disney Channel. Those four channels allow Disney to wield enormous power when negotiating deals. Following standard industry practice, Disney has taken to “tying and bundling” these channels with other, less desirable channels. If a cable operator wants to carry the Disney Channel, they have to also carry ABC Family, SoapNeta and Toon Disney. Want to carry ESPN? Then you also need to carry ESPN2, ESPN News, ESPN Classic, ESPN 360 (Internet) and ESPNU.

The wholesale programming and retransmission consent practices described above harm the public interest and conflict with key communications policy goals in aleast four ways: (i) reducing choice and program diversity; (ii) increasing costs for cable;(iii) reducing competition; and (iv) impeding broadband deployment...

• Appeals Court: ‘Bundling’ Cable Service Is Not Illegal

....whatever issues consumers and their advocates might have with bundling, the companies that do it aren’t breaking any antitrust laws, according to a recent opinion issued by the U.S. Court of Appeals for the 9th Circuit.

The case originated in 2007, with a class action lawsuit filed in federal court claiming that the practice of “bundling” reduced consumer choice and increased prices. The plaintiffs in the case sued programmers like NBC Universal, Viacom, and Disney, as well as cable and satellite providers like Time Warner, Comcast, Cablevision, and DirecTV. But in 2009, a lower court ruled that when it came to antitrust, the plaintiffs had no case, and that’s now been upheld by the 9th Circuit.

The opinion essentially says that the plaintiffs have failed to show that the practice of bundling hurts competition at all. While bundling has become current business practice, and some consumers clearly resent it, that doesn’t make it illegal. “The complaint does not allege that Programmers’ practice of selling tied “must-have” and low-demand channels excludes other sellers of low-demand channels from the market,” writes Circuit Judge Sandra Ikuta, who authored the opinion of a three-judge panel....